1. It means the business is not astute enough to expand further at previous % rates and market valuations. A business that is expanding successfully internationally has way more future horizon value than an Australia locked business.
This is born out by the enormous overperformance of the American stock market which is dominated by international players. Versus our localised ASX that has lagged BADLY following the recovery from the GFC. Cos we have so few genuine international companies here.
2. Because it also means wasted time and capital (hence the pull out). Sometimes yes I am a believer in knuckle down strategy. Going international takes losses, takes decades sometimes to pay huge windfalls. Suck up the short term pain. Provided the businesses are not major loss makers for a lengthy time then believe in the strat and push onwards."
In response to your Point 1, yes that all sounds nice and warm and fuzzy, but international expansion which occurs at the expense of shareholder value is little more than expansion for the sake of it. As such, it destroys the wealth of the owners of the business, rendering worthless the "future horizon value" to which you refer.
As for the ASX lagging badly following the GFC, well, that's not really a measure of anything, I don't believe, because the "ASX" is dominated by a handful of very largem but actually quite poor quality, companies. I can show you a long list of Australian companies that have performed exceptionally well over extended periods of time without having put a foot offshore.
As for your Point 2, sure, the "knuckle-down strategy" is fine, but at some stage you need to draw some sort of line in the sand, or you end up kidding yourself, and the result is a waste of the company's resources which could be better deployed elsewhere.
For context, Ramsay's Asia Pac segment (which is basically Australia, and the still-unprofitable JV with Sime Darby) generates EBIT to Assets of around 12%, which is above the company's weighted average cost of capital.
By contrast, Ramsay UK generates a mere 6% EBIT on Assets, and Ramsay France is not much better, at 7% EBIT to Assets. So, neither of these divisions earns its cost of capital.
But together, UK and France represent represent $4.7bn of Ramsay's asset base, which is the same order of magnitude as Ramsay Asia Pac ($5.0bn).
So, this company has half of its invested capital not washing its face, in terms of generating value for the owners of the business.
And this is after plugging away at it for more than a decade in the UK (Capio UK was acquired in 2007), and after 7 years in France (Sante Fe was acquired in 2007.)
"Suck up the short term pain. Provided the businesses are not major loss makers for a lengthy time, then believe in the strat and push onwards."
We have been sucking up the pain for far longer than the short-term.
There is no objective basis left on which to "believe in the strat".
Besides, there is no reason for something favourable to necessarily take a lengthy period of time. I can show you plenty of companies that went offshore and succeeded quite quickly (certainly well within the 7 to 10 years that Ramsay have been toiling away at it, to little avail).
"RHC being a true international private hospital player would be excellent. Genuine exposure to demographic changes the world over and international."
They tried.
It hasn't worked.
Successive management teams haven't been able to make it work.
So what possible change could make it work in the future?
Nope, sorry.
Time to liberate the capital and to cease the value-destructive allocation of capital offshore.
RHC Price at posting:
$59.90 Sentiment: Buy Disclosure: Held
(20min delay)